Global X launches global SMID ETF

Global X ETF has expanded its international equity range with the launch of the Global X MSCI International Small and Mid-Cap ETF (ASX: ISMD), offering Australian investors low-cost exposure to small- and mid-cap companies across developed markets outside Australia.

The new exchange-traded fund tracks the MSCI World ex Australia SMID Cap Select Index, providing exposure to around 300 companies across developed markets in a single portfolio.

The launch comes as global equity markets remain heavily concentrated in a handful of mega-cap stocks, prompting investors to seek broader diversification and exposure to companies earlier in their growth cycle.

Global X chief executive Alex Zaika said the ETF was designed to complement investors' existing global equity allocations.

"Many Australian investors already have meaningful exposure to the world's largest companies through broad global equity funds. ISMD complements those portfolios by providing access to a part of the market that has historically been underrepresented, despite being home to many of tomorrow's market leaders," Zaika said.

"As investors increasingly look to build resilient, diversified portfolios, we're continuing to expand our product suite with innovative, cost-effective solutions that provide access to areas of the market that have traditionally been difficult to access through index investing."

MSCI head of Asia Pacific Shane Edwards said investor interest was increasingly shifting beyond large-cap stocks.

"We are pleased to bring MSCI's index design capabilities to this initiative at a time when investors are increasingly looking beyond large-cap equities for sources of diversification. Our index supports Global X in offering investors exposure to small and mid-cap companies across international developed markets, a segment that represents a significant share of the global equity opportunity set," Edwards said.

Global X senior and investment strategist Marc Jocum said the investment case for global SMIDs had strengthened significantly.

"The investment case for global SMIDs has evolved considerably. While these companies continue to offer attractive growth potential, we're also seeing stronger balance sheets, improving profitability and more attractive valuations relative to large-cap equities," Jocum said.

He added combing small and mid-cap companies within a single portfolio allows investors to remain invested as business mature, rather than exiting positions as companies outgrow traditional small-cap benchmarks.

Global X said the ETF provides a transparent, rules-based alternative to active managers, which have historically dominated global SMID investing.